LAW ,CONTRACTS,COMPENSATION LAW

INTRODUCTION:

 What is law?
 No single answer available
 Society has rules & their own set of rules
 These rules form the legal system or law

LEGAL RULES PURPOSES:

 Rules prohibiting or compelling certain behavior

 Compensation to another for injury caused
 Procedural issues eg; wills,contracts,transfer of land
 Guidelines relating to punishment for those breaking certain rules
 Administrative rules for running the country
 Rules regulating the legislature(law making body)

AIM OF THE COURSE:

 Practical & comprehensive knowledge of the legal principles

 Requirements & obligations encountered in business life
 Relation to contracts for the carriage of goods by sea

ENGLISH LAW:

 Common law system contained in a set of legal principles & rules

 But not enacted laws & deceisions/judgement based on previously made
judicial systems

TYPES OF LAW:

PUBLIC LAW:

 Governs the relationship between individuals & the State

 Person/company if do not comply they will be dealt with by the State

PRIVATE LAW:

 Governs the relationship between one individual and another

CRIMINAL LAW:
 Prohibit individuals from conducting themselves which can be harmful to
the community as a whole

 Imposes various sanctions & penalties

 Fines imposed for less serious crimes & imprisonment for more heinous
crimes

CIVIL LAW:

 Regulating relations between individuals in the principle area of conduct

 Imposes special type of rules which acts as a standard of behaviour

 Imposes rules for resolving disputes

INTERNATIONAL LAW :

 International Law consists of the rules and principles of general application

dealing with the conduct of States and of international organizations in their
international relations with one another and with private individuals,
minority groups and transnational companies.

INTERNATIONAL LEGAL PERSONALITY :

 International legal personality refers to the entities or legal persons that can
have rights and obligations under international law.
 A State has the following characteristics:
 (1) a permanent population;
 (2) a defined territory;
 (3) a government; and
 (4) the capacity to enter into relations with other States.

BASIC PRINCIPLES OF TORT:

 Tort means wrong

 Remedy where no contracts are involved

 Non contractual civil liability

 Person suffers injury to himself or the property & how he might sue the
wrong doer to seek some remedy for his damage

 Law of Tort there by deals with non contractual civil wrongs

 Examples: Tresspass,Nuisance,Conversion(land
grabbing),Defamation,Fraud,Negligence

DUTY OF CARE:

 Liability in negligence ie legal duty not be careless

 Not all carelessness will result in liability for negligence

 Both persons involved should have legal proximity

 Duty of care requirements as per law in areas of negligence will give rise to
claims for damages caused

 Courts decide whether reasonable care was taken to avoid acts or

omissions

BREACH OF DUTY OF CARE:

 Plaintiff must show whether duty was breached ie actual negligent act or
omission

 Negligent behavior is judged in the basis of acceptable standards of

behavior

 So Courts will look at each situation on its own particular facts

 Plaintiffs should show the defendants were unreasonable but also show
that this negligence caused the injury he suffers from it

POLICY CONSIDERATIONS:
 Court considers if any policy(course of action adopted) reasons to reduce
the scope of duty of the person who might claim consideration

 Courts consider demands of public policy whether to extend or limit a

legal principle

PURE ECONOMIC LOSS:

 In relation to law of Torts the most important public policy is “pure

economic loss”

 This is because a claim can be brought in a commercial situation within

the Tort of negligence

 But here no contractual relationships exists between both parties

 So the remedy in Tort is to put the injured party back where he would
have been if the Tort had not occurred

 But claim in Tort should include damage or loss of goods

 No loss or profits can be claimed which is pure economic loss (if there is a
contract)

MISREPRESENTATION:

 False statements of facts

 Could be innocent or negligent or it could be deliberate

 Its fraud which leads to claim damages within Tort of deceit

INNOCENT REPRESENTATION:

 Made in a reasonable belief of its truth

 No liability exists regardless of outcome

NEGLIGENT MISREPRESENTATION:

 No duty of care
 Example: Bank asked to give credit reference of a person & given as
“Good”.Plaintiff acts on good reference & suffers financial loss.

REMEDIES IN TORT :

 To put plaintiff back in the position as if that Tort had not occurred

 Pure economic loss to recover profit/loss impossible in a Tort

 In Tort of deceit damages awarded as a result of direct consequence of

deceit whether intended or not

VICARIOUS LIABILITY:

 Liability on behalf of another

 Employer/Employee

 Employer responsible for Torts of his employee

 If the Torts are committed within the confines of the employment

 Employer settles the claims of the Plaintiff due to employees action

 Employer in better position to settle damages & insured as well

DEFAMATION:

 Publication of statement against a person or company

 Tends to lower person or company in the society

 Tends to avoid/shun the person/company

 Statements of opinion may be defamatory

 Essence of tort is publication/communication of the falsehood to atleast

one other person

 Here Tort committed is libel or slander

LIBEL:

 Defamation in some permanent form

 Pictures,effigies ,writing and on print

 Broadcasting by means of sound or visual media

 May be a crime as well in Tort

SLANDER:

 Defamation verbally done

 Example:Suggestion of opinion on somebody as untrustworthy person,so

business deal not completed leads to special damages claim

BASIC PRINCIPLES OF CONTRACT LAW

AGREEMENTS & CONTRACTS

 Essence of commercial relationships is an agreement

 Agreements are made where by parties promise to provide goods or

services usually for monetary payment

 These agreements which give rise to rights & liabilities are known as
“Contracts”

 Contracts are legally binding agreements

 Contracts can be under seal ie registered in a court or simple contract

which are normally used in business contracts

OFFER:

 Offer is an unequivocal(without doubt) expression of willingness to

contract on specified terms & the willingness to be bound

 Duration of offer may be terminated by rejection or counter offer,time

lapse,revocation by offerer & death/incapacity of both

 Invitation to offer is an invitation to another to make an offer

 Eg: The catalogue of prices is not an offer. It is the invitation to the
purchaser to make an offer.

COUNTER OFFER:

 A counter offer is an offer to an offer

 Eg: A offered his land to B for 100000 Rs but B willing to buy for
900,000Rs,which is called counter offer which A may or may not agree.

ACCEPTANCE:

 Offer made by the offerer must be accepted by the offeree on the stated
terms

 Intention to be bound by an agreement

 Acceptance should match the offer exactly

 If the offeree alters the offer then it becomes an counter offer

 Acceptance must be communicated to the offerer

CONSIDERATION:

Consideration is the concept of legal value in connection with contracts. It is

anything of value promised to another when making a contract. For example, if
A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000,
and B's consideration is the car.

Conversely, if A signs a contract to buy a car from B for $0, B's consideration is
still the car, but A is giving no consideration, and so there is no valid contract.
However, if B still gives the title to the car to A, then B cannot take the car back,
since, while it may not be a valid contract, it is a valid gif.

 A proposal when accepted constitutes a promise or an agreement

 An agreement is enforceable if it is supported by consideration only

 Once offer has been accepted it becomes an agreement

 Offeree must not only accept the offer but must in return give some
element or service
CONSENT :

 One of the ingredient of a contract is free consent

 Parties should be competent to contract but also consent to enter into a
contract
 Two or more persons are said to be in consent when they agree upon the
same thing in the same sense

 COMPETENCY TO CONTRACT

 One of the basic question for entering a contract is to understand who all
are competent to contract

 One of the essentials of a valid contract is the competency of the parties to

make contract. Law has laid down certain rules as to who are competent to
enter into a valid contract. Every person is competent to contract who is of
the
1. age of majority according to the law to which he is subject, and
2. who is of sound mind and
3. is not disqualified from contracting by any law to which he is subject

 In a Contracts Setting, What do the Terms “Competency” and “Capacity”

Mean?

Both parties to a contract must have contractual capacity in order for

the agreement to be legally binding. Contractual capacity means that
the parties are able to understand that a contract is being formed, and that
they understand the basic nature of the contract. Contractual capacity is
sometimes referred to as “competency” or “capacity”.

 Contractual competency and capacity has nothing to do with a person’s skill

in bargaining or negotiating a contract. Just because a person does not
understand every detail and provision in a contract does not mean that they
 lack the competency or capacity to form the contract. It is enough if they
understand that they are entering into a contract, and that they understand
the general nature of the contract.

VALID CONTRACT:

 A valid contract which is an agreement enforceable by law,moreover..

 Parties are competent to contract
 Their consent is free
 The object and consideration of agreement is lawfull
 Agreement not expressly declared void by law

VOID CONTRACT:

 Agreement not enforceable by law

 No legal effect at all
 Neither legal rights or obligations flow from that agreement
 No party have the rights to claim
 Eg: Without consideration,incompetent contract,impossible/illegal acts etc

VOIDABLE CONTRACT:

 Agreement which is enforceable by law at the option of one or more of the

parties thereto
 Agreement can be avoided or set aside at the option of one of the party
 Eg: agreements under coercion,undue influence,fraud & misrepresentations

UNLAWFULL OR ILLEGAL CONTRACTS:

 Illegal agreements are unlawfull,void & forbidden by law

 Eg: agreement to commit murder,dacoity or smuggling
 But every void agreement need not be illegal

FORMATION OF A CONTRACT:
 There are five basic requirements that need to be satisfied in order to make
a contract:
 ● An agreement between the parties (which is usually shown by the fact
that one has made an offer and the other has accepted it).
 ● An intention to be legally bound by that agreement (ofen called intent to
create legal relations).
 ● Certainty as to the terms of the agreement.
 ● Capacity to contract.
 ● Consideration provided by each of the parties – put simply, this means
that there must be some kind of exchange between the parties. If I say I will
give you my car, and you simply agree to have it, I have voluntarily made you
a promise (ofen called a gratuitous promise), which you cannot enforce in
law if I change my mind. If, however, I promise to hand over my car and you
promise to pay me a sum of money in return, we have each provided
consideration. In addition, in some cases, the parties must comply with
certain formalities. Remember that, with a few exceptions, it is not
necessary for a contract to be in writing – a contract is an agreement, not a
piece of paper. In this part of the book we will consider these different
requirements for
 the creation of a contract.

PERFORMANCE OF A CONTRACT
 is actually completing the deal according to the terms given in the contract.
For example, you want to buy that snazzy looking 1998 Ferrari at your local
dealer's clearance sale. Your dealer, Mr. X, offers to sell you that slick-looking
Italian car if you pay him $97,000. Afer a bit of bargaining, you agree to the
terms and get the car at a reduced price of $96,995, signing on the dotted
line. A contract has been accepted. Mr. X, your car dealer, will deliver the
1997 Ferrari and then you pay him the balance due. The dealers delivery of
the car and your payment of $96,995 are the performance of the contract.

Both parties must live up to their end of the bargain in the contract to have
closure. In other words, until both parties have properly performed under
the contract, the contract remains open.
 A contract places a legal obligation upon the contracting parties to perform
their mutual promises, and it carries on until the discharge or termination of
the contract. The most natural and usual mode of discharging a contract is to
perform it. A person who performs a contract in accordance with its terms is
discharged from any further obligations. As a rule, such performance entitles
him to receive the other party’s performance.

 Exact and complete performance by both the parties puts an end to the
contract. In expecting exact performance, the courts mean
that, performance must match contractual obligations. In requiring a contract
to be complete, the law is merely saying that any work undertaken must be
carried out to the end of the obligations.

 A contract should be performed at the time specified and at the place agreed
upon. When this has been accomplished, the parties are discharged
automatically and the contract is discharged eventually. There are, however,
many other ways in which a discharge may be brought about. For example,
it may result from an excuse for non-performance. In certain cases
attempted performance may also operate as a substitute for actual
performance, and can result in complete discharge of the contract.

 Example: A promises to deliver goods to B on a certain day on payment of Rs

1,000. A expires before the contracted date. A‘s representatives are bound
to deliver the goods to B, and B is bound to pay Rs 1,000 to A‘s
representatives.

 Types of Performance: Performance, as an action of the performing may be

actual or attempted.

DISCHARGE OF A CONTRACT

 Discharge of a contract implies termination of contractual obligations. This is

because when the parties originally entered into the contract, the rights and
duties in terms of contractual obligations were set up. Consequently when
those rights and duties are put out then the contract is said to
have been discharged. Once a contract stands discharged, parties to it are no
 more liable even though the obligations under the contract remain
incomplete.

 A Contract is deemed to be discharged, that is, concluded and no longer

binding, in the following circumstances:

 Discharge by performance.
 Discharge of Contract by Substituted Agreement.
 Discharge by lapse of time.
 Discharge by operation of law.
 Discharge by Impossibility of Performance.
 Discharge by Accord and Satisfaction.
 Discharge by breach.

Discharge by performance:

 Where both the parties have either carried out or tendered

(attempted) to carry out their obligations under the
contract, is referred to as discharge of the contract by
performance.
Discharge of Contract by Substituted Agreement

 A contract emanates from an agreement between the parties. It thus

follows that, the contract must also be discharged by agreement.
Therefore, what is required, inevitably, is mutuality. Discharge by
substituted agreement arises when a contract is abandoned, or
the terms within it are altered, and both the parties are in conformity
over it.

Novation
 The term novation implies the substitution of a new contract for the original
one. This arrangement may be either with the same parties or with different
parties.
Rescission
 This refers to cancellation of all or some of the material terms of the
contract. If the contracting parties mutually decide to do so, the
respective contractual obligations of the parties stand terminated.

Alteration
 This refers to a change in one or more of the terms of a contract with
the consent of all the contracting parties. Alteration results in a new
contract but parties to it remain the same.

Waiver
 The term waiver implies abandonment or relinquishment of a right.
Where a party deliberately abandons its rights under the contract, the
other party is released of its obligations, otherwise binding upon it.

Discharge by lapse of time

 A contract stands discharged if not enforced within a specified period
called the ‘period of limitation‘. The Limitation Act, 1963 prescribes
the period of limitation for various contracts.

Discharge by Impossibility of Performance

 Sometimes after a contract has been established, something might
occur, though not at the fault of either party, which can render the
contract impossible to perform, or illegal, or radically different from
that originally undertaken.

Discharge of operation of law

 A contract stands discharged by operation of law in the following
circumstances.
Unauthorized material alteration of a written
document
 A party can treat a contract discharged (i.e., from his side) if the other
party alters a term (such as quantity or price) of the contract without
seeking the consent of the former.

What is a 'Quasi Contract'

 A quasi contract is an agreement between two parties without previous
obligations to one another that has been created and legally recognized
by the court system.

 Under a quasi-contract, neither involved party is expected to create

such an agreement; this contract is arranged and imposed by a judge to
correct a circumstance in which one party acquires something at the
expense of the other party.

BREAKING DOWN 'Quasi Contract'

 For example, consider a pizza that is delivered to the wrong address.

The pizza has already been paid for. If the individual does not correct
the delivery man and instead keeps the pizza, the court system could
issue a quasi contract that would require the individual to pay back the
amount of the pizza to the party that paid for the pizza. The contract is
used to prevent any party from benefiting from the situation at the other
party's expense; the restitution required under the contract is to make
the situation fair.

The History of Quasi Contracts

 Under common law jurisdictions, quasi contracts can be followed back
to the Middle Ages under a form of action known as indebitatus
assumpsit. This law saw that the plaintiff in a case received a sum of
money from the defendant, as dictated by the courts, as if the
defendant had agreed to pay the plaintiff. Indebitatus assumpsit was
 the courts' way to make one party pay the other as if a contract or
agreement already existed between the two parties – the defendant’s
promise or agreement to be bound by the contract requiring reparations
was implied by law. At the very beginning of the quasi contract's use, it
was typically imposed in order to enforce restitution obligations.

Requirements
 Certain aspects must be in place for a judge to issue a quasi contract.
One party – the plaintiff – must have given a tangible item or a service
to another party – the defendant – with an expectation/implication that
payment would be given. The defendant must have accepted or
acknowledged receipt of the valuable thing but did not make any effort
or offer to pay. Then, the plaintiff must express why it would be unjust
for the defendant to receive the thing of value without paying for it, so
the defendant received unjust enrichment.

 Considering the example above, the individual that ordered the pizza
and paid for it would have every right to demand payment from the
individual who actually received the pizza; the first individual is the
plaintiff, the latter is the defendant. A quasi contract, also known as an
implied contract, would be handed down, requiring the defendant to pay
restitution to the plaintiff. The restitution – known as quantum meruit – is
calculated by the amount or the extent to which the defendant was
unjustly enriched

What is a Breach of Contract?

 A business contract creates certain obligations that are to be fulfilled by
the parties who entered into the agreement. Legally, one party's failure
to fulfill any of its contractual obligations is known as a "breach" of the
contract. Depending on the specifics, a breach can occur when a party
fails to perform on time, does not perform in accordance with the terms
of the agreement, or does not perform at all. Accordingly, a breach of
contract will usually be categorized as either "material" or "immaterial"
for purposes of determining the appropriate legal solution or "remedy"
for the breach.

Breach of Contract: An Example

 Let's assume that R. Runner contracts with Acme Anvils for the
purchase of some of its products, for delivery by the following Monday
evening. If Acme delivers the Anvils to Runner on the following Tuesday
morning, such a breach of the contract would likely be deemed
immaterial, and R. Runner would likely not be entitled to money
damages (unless he could show that he was somehow damaged by the
late delivery).
However, assume now that the contract stated clearly and explicitly that
"time is of the essence" and the anvils MUST be delivered on Monday. If
Acme delivers after Monday, its breach of contract would likely be deemed
"material," and R. Runner's damages would be presumed, making Acme's
liability for the breach more severe, and likely relieving Runner of the duty
to pay for the anvils under the contract.
What Happens After a Contract is Breached?
 When a breach of contract occurs or is alleged, one or both of the
parties may wish to have the contract enforced on its terms, or may try
to recover for any financial harm caused by the alleged breach.
 If a dispute over a contract arises and informal attempts at resolution
fail, the most common next step is a lawsuit. If the amount at issue is
below a certain dollar figure (usually $3,000 to $7,500 depending on the
state), the parties may be able to resolve the issue in small claims
court.
 Courts and formal lawsuits are not the only option for people and
businesses involved in contract disputes. The parties can agree to have
a mediator review a contract dispute, or may agree to binding
arbitration of a contract dispute.These out-of-court options are two
methods of "alternative dispute resolution."

Remedies for a Breach of Contract

> When an individual or business breaches a contract, the other party to

the agreement is entitled to relief (or a "remedy") under the law. The main
remedies for a breach of contract are:
1. Damages,
2. Specific Performance, or
3. Cancellation and Restitution
Damages
 The payment of damages -- payment in one form or another -- is the
most common remedy for a breach of contract. There are many kinds of
damages, including the following:
1. Compensatory damages aim to put the non-breaching party in the
position that they had been if the breach had not occurred.
2. Punitive damages are payments that the breaching party must
make, above and beyond the point that would fully compensate the
non-breaching party. Punitive damages are meant to punish a wrongful
party for particularly wrongful acts, and are rarely awarded in the
business contracts setting.
3. Nominal damages are token damages awarded when a breach
occurred, but no actual money loss to the non-breaching party was
proven.
4. Liquidated damages are specific damages that were previously
identified by the parties in the contract itself, in the event that the
contract is breached. Liquidated damages should be a reasonable
estimate of actual damages that might result from a breach.

Specific Performance

 If damages are inadequate as a legal remedy, the non-breaching party

may seek an alternative remedy called specific performance. Specific
performance is best described as the breaching party's court-ordered
performance of duty under the contract. Specific performance may be
used as a remedy for breach of contract if the subject matter of the
agreement is rare or unique, and damages would not suffice to place
the non-breaching party in as good a position as they would have been
had the breach not occurred.

Cancellation and Restitution

 A non-breaching party may cancel the contract and sue for restitution if
the non-breaching party has given a benefit to the breaching party.
"Restitution" as a contract remedy means that the non-breaching party
is put back in the position it was in prior to the breach, while
"cancellation" of the contract voids the contract and relieves all parties
of any obligation under the agreement.
A contract may be discharged by frustration.
 A contract may be frustrated where there exists a change in
circumstances, after the contract was made, which is not the
fault of either of the parties, which renders the contract either
impossible to perform or deprives the contract of its
commercial purpose. Where a contract is found to
be frustrated, each party is discharged from future
obligations under the contract and neither party may sue for
breach. The allocation of loss is decided by the Law Reform
(Frustrated Contracts) Act 1943.

Condor v Baron Knights [1966] 1 WLR 87

A 18 year old agreed by contract to play the drums for the

defendant band for 7 nights per week for 5 years. The claimant
suffered a mental breakdown and was told by his doctor that he
should not perform more than 4 nights per week. The band
dismissed him. He brought a claim for wrongful dismissal.

Held:

The claimant's action was unsuccessful as his medical condition

made it impossible for him to perform his contractual obligations
and the contract was thus frustrated.
QUANTUM MERUIT
 The Latin term quantum meruit, translates to “as much as he
has earned,” and refers to the actual value of services
rendered. The legal theory of quantum meruit holds that a
person should not be obliged to pay, nor should the other
party receive, more than the value of the services exchanged.
This concept may be used as an equitable remedy in a civil
lawsuit, often where the transaction for goods or services was
done without a written contract specifying the amount due. To
explore this concept, consider the following quantum
meruit definition.

Definition of Quantum Meruit

 Pronounced
kwahn-tuhm mare-ooh-it
Noun
1. Payment for the value of goods or services as partial
fulfillment of a contract, or when there is no contract
specifying a price in the transaction.

Use of Quantum Meruit

 Many situations exist in which people receive services from someone
else, often on an unexpected basis, without signing a contract for
payment, or without first obtaining a price for those services, although
a reasonable person would know that payment is expected. Examples
of these situations include receipt of care by an emergency room
physician, legal services without signing a fee agreement, or obtaining
spur-of-the moment services of the neighbor’s gardener. In such
situations there can be no doubt that the individual deserves to be paid
for services rendered, but it is not uncommon for disputes to arise over
the actual amount billed after the fact.
Acceptance of Services
 A formal, written agreement is not required for a contractual
relationship to exist. When one individual provides services to another,
who has either requested those services, or freely accepted them,
knowing they are not performed free of charge, a contract is seen to
exist. In the event the person receiving services refuses or fails to pay,
the provider of services may file a civil lawsuit seeking payment.
 The plaintif (provider) would need to show the court that
the defendant (receiver) requested the services, or that he had an
opportunity to decline the services if he did not want to pay for them.
The rendering of services without giving the defendant an opportunity
to decline does not generally constitution acceptance under the
theory of quantum meruit.
 For example:
Immediately following a hurricane that swamped the city, many residents
found their basements flooded, and heating systems inoperable, as the
storm left a cold front in its wake. Ronald, a contractor, was going door to
door in the neighborhood offering his services as a contractor to get
people’s furnaces going again. Mary gratefully accepts Ronald’s services,
for which he had tentatively quoted a price of $500 plus parts. Ronald
patched up Mary’s system, then moved on to the next house without
waiting to get paid.
About a week after the storm, the city instituted a program to repair or
replace residents’ damaged heating systems for a very low flat rate, in an
effort to get people back on their feet. When Ronald’s bill arrived in Mary’s
mailbox, she didn’t think it was fair to have to pay nearly $600, when
Ronald’s fix was temporary, and the city had stepped up to replace her
system. Ronald files a small claims lawsuit requesting payment for the
services he performed, and the parts he provided.
At the trial, Ronald tells the judge that he was offering his services as a
contractor in the wake of the hurricane. Mary agrees that he had quoted
her a tentative price, which proves she did not expect to receive those
services free of charge. The judge rules in Ronald’s favor, ordering Mary to
pay for the parts and services she received. Otherwise, she would have
received a benefit at someone else’s expense. The fact that the repairs
were a temporary fix is not relevant, as that was the nature of the services
offered and accepted.

MAIN PRINCIPLES OF LAW RELATING TO

AGENCY
 Agent acts as a legal representative of another person/company but does
not act on his own account

 Shipping business involves Agents performing very many tasks on behalf

of his Principal

 Agent is appointed by Principals & business involve the relationship

between Agent & Principal

 Its vital to understand the rights,duties & liabilities that are consequence
of this relationship

 Agent brings his Principal into contractual relationships with Third

parties but no liabilities attached to Agent

AGENCY RELATIONSHIP:

 Agency agreements are contracts between Agent & Principal

 Contract is not a essential requirement of a relationship

 The existence or non existence of a contract does not affect the

relationship

 Absence of contract leads to non obligation by Agent for service &

payment for service from Principal

 If Agent does act without contract & incurs loss/expenses he is entitled to

recover same from Principal without a contract

AGENCY CREATION
EXPRESS AGREEMENT:
 Expressly agreed in writing or orally

 Extent of authority upon which the Agent may act on Principals behalf

 Extent of authority depends on the construction of the agreement

 Oral or written but usual Law of contract applies

IMPLICATION OR CONDUCT;

 By words or conduct holds out another as having authority to make

contracts on his behalf

 Will be bound by these contracts as if expressly authorized them

 Example: Shipping Agent appointed by Principal as duties of agent in

shipping business applies

BY NECESSITY:

 Agency of necessity occurs when a person is entrusted with anothers

property

 So it is necessary to do something to preserve that property

 Example: Its impossible to get Principals instructions due to various

factors beyond control

 Must act in bonafide(good faith) in the interests of all parties concerned

RATIFICATION:

 Agents contract on behalf of a named Principal without authority

 But this contract may be ratified later by the Principal

 So the Principal basically confirms this contract by ratifying

 Principal must have contractual capacity at the date of contract

 Principal must also have the required capacity at the date of ratification

DUTIES OF AGENT:
 To exercise due diligence in performance of his duties

 To apply his expertise in his performance

 To render account to the Principal

 Not to become another Principal with his Principal

 Not to make secret profits

DUTIES OF PRINCIPAL:

 To remunerate the Agent

 To indemnify the Agent for any liabilities on behalf of Principal

TERMINATION OF AGENCY RELATIONSHIP:

 Termination by mutual consent

 Agents authority if revoked by Principal then pay damages to Agent for

loss of commission or remuneration

 Principal died or bankrupt or mentally unstable

 Principal place of business located in Agents enemy country

Limitations On Liability
 The Limitations on Liability can be used to limit what breach-of-
contract damages either party could be liable for.
 Under common law, parties are only liable for foreseeable damages,
not for unforeseeable damages. Often, the limitations on liability clause
is a simple restatement of this common law principle, that neither party
would be liable for unforeseeable losses suffered by the other. More
robust limitations on liability clauses can go further, to limit even
foreseeable losses, either those losses arising out of certain kinds of
claims (infringement, or disclosure of confidential information for
example), or putting a cap on the total losses the party can be liable for.
 Even though the simple version of the clause simply restates common
law principles, and is, therefore, redundant, including one likely has
a placebic effect. The clause is so common, attorneys and
businessmen are so accustomed to seeing them and including them
that the small cost of including an extra, short clause in the agreement
is probably outweighed by making a party more comfortable signing an
agreement including this clause they have become used to seeing.
 The basic Contract Standards clause simply restates the common law
bar against unforeseeable damages. Our variants offer more robust
limits, limiting claim types and total liabilities.
Limitation of liability in Commercial contracts

Commercial parties entering into an agreement – whether it is an

agreement for the sale of goods, a distribution agreement, or a cooperation
agreement – will generally be concerned about the liability they may incur
arising from their contractual obligations. Exclusion clauses can be found in
nearly all such ‘business-to-business’ contracts, and both parties will have
a separate interest in drafting the clause in such a way as to minimise their
own liability if things should go wrong. However, not all liabilities may
legally be limited.

CARRIERS RIGHTS & IMMUNITIES

>exceptions from liability
>right to deviate
>rights in respect of dangerous goods
EXCEPTIONS FROM LIABILITY:
Neither the carrier or ship will not be
responsible for loss or damage arising
from:
>neglect or default of Master,pilot,mariner
or servants of the carrier in navigation &
management of the ship
>Fire unless caused by fault of carrier
>perils,dangers or accidents of the sea
>Act of God,War Or public enemies
>arrest under legal process
>quarantine regulations
>act or omission of Shipper or his agent
>strikes by labour
>riots
>saving or attempting to save life or
property at sea
>wastage in bulk/weight cargo due to
inherent qualities
>insufficiency of packing or marks
>Deviation of vsl to save life or property at
sea
>Dangerous goods if not declared by
Shipper then dangerous cargo may be
landed,destroyed or jettisoned anytime
before discharge
>declared dangerous goods can be dealt
with as above if found/becomes dangerous
Controls on limitation clauses under English law

 Since parties may not always have equal bargaining power, English law
stipulates different ways to restrict the effect of unfair limits on liability. A
party’s liabilities are usually divided into:

 Liabilities you cannot limit.

 Liabilities you can limit if you mention them expressly.

 Liabilities you can limit if the clause is clear enough.

 Liabilities you can limit by a reasonable clause if UCTA applies.

 A restriction of liability that offends these controls is normally

unenforceable. The rest of the contract remains enforceable under the
principle of severance, which applies even to contracts lacking an
express severance clause.

Liabilities you cannot limit

> Some liabilities simply cannot be limited, and a clause that purports to do
so will therefore be void. This is the case for fraud (dishonesty) by a
contracting party.

 Moreover, where the Unfair Contract Terms Act 1977 (“UCTA”) applies
to the contract the contracting parties may not limit their liability for
injury or death caused by a lack of reasonable care, or for supplying
goods without the right to do so.

 It is common practice to preserve these liabilities, or some of them,

expressly in the contract. It is, however, doubtful whether there is any
legal need to do so.

 Other contractual clauses falling within the ambit of UCTA will be valid
only if they pass the reasonableness test set out in section 11(1) of the
Act. This includes clauses limiting liability for breach of standard terms,
negligence, misrepresentation etc.

 A clause will only pass the reasonableness test if it was fair and
reasonable to include the term in the contract, considering everything
the parties knew or should reasonably have contemplated when they
 entered into the contract. The test is easily satisfied in a fully-negotiated
clause between commercial parties of roughly equal bargaining power,
especially if both parties understood the risks and were advised by
lawyers.

 The more prominent, heavily negotiated and well understood the

clause, the more likely it is to be upheld. The test is harder to satisfy in
standard terms, especially if the limitation clauses are not prominent.
However, reasonableness will always depend on the facts and context
of the transaction.

 UCTA will apply to most ‘business-to-business’ agreements, but not all.

For instance, international contracts are often exempt. UCTA is
designed to regulate limitation clauses in the UK; it is not meant to
interfere with international trade. Thus contracts for the international
supply of goods are completely exempt from UCTA’s controls. English-
law contracts with an international element are also exempt if they lack
a strong connection with the UK.

 UCTA also partially exempts shipping contracts (charterparties, carriage

of goods by sea, salvage and towage). If UCTA applies to the contract,
i.e. it is a contract with sufficient connection with the UK, the parties
cannot limit liability for personal injury or death caused by negligence,
but the UCTA reasonableness test will not apply to the contracts.

Liabilities you can limit if you mention them expressly

 Some liabilities must be limited expressly, and a general limit on liability

arising out of the agreement will not affect them. Specifically, these are
liabilities arising from negligence and breach of statutory implied
conditions in sale of goods, e.g. the requirements that goods are of
satisfactory quality and that they are fit for any purpose made known to
the seller.

Therefore, if a party wants to limit its liability for negligence or breach of

implied terms, specific reference to these liabilities and their
exclusion/limitation needs to made in the contract. A general exclusion
wording, without specific reference to such liabilities will not be sufficient.

Liabilities you can limit if the clause is clear enough

 Some liabilities can be limited by clear wording - that is, they are
effective if they survive restrictive interpretation. These are liabilities
arising from dishonest or deliberate breach by another person. In this
respect, it is important to note that a party cannot limit liability for its
own dishonesty, but may limit its liability for the dishonesty of an
employee, agent or sub-contractor.

INTERNATIONAL TERMS OF SALE

 contract for sale of goods
 Specified goods ie identifiable
 Unascertained goods ie yet to be produced
 Passing of property from Seller to Buyer
 right of ownership transferred
 Risks involved in transaction

INTERNATIONAL CONTRACT OF SALE

 >International Chamber of Commerce
 >affliated to various countries local Chamber of commerce
 group of people representing local Biz community
 >Publish agreed set of terms for Intnl Trade called “INCOTERMS”
 =current edition is “INCOTERMS 2000”
 =guides to buyer/seller responsibility under contracts
 =International trade keeps changing so regularly reviewed & revised
accordingly
 =includes “MARITIME INCOTERMS”

EXAMPLES OF INCOTERMS
MARITIME TERMS:
 FAS:FREE ALONGSIDE A PORT
 Sellers obligation ceases
FOB: FREE ON BOARD
 popular
 seller to load on stipulated time period on said vessel
 seller bears costs of loading
 cargo passes Ships rails sellers passes the risk to buyer
 on loading Seller shud inform Buyer to take necessary insurance
 Buyer pays freight & arranges vsl for loading
 Buyer nominate vsl,name & dates for Ldg

CIF:COST,INSURANCE,FREIGHT
 contract based on discharge port
 seller pays for loading,freight & insurance
 but Buyer bears these costs
 buyer bears the risk when goods pass the ships rail but insurance already
taken by Seller
 Seller must tender all documents ie BL,Invoice etc to Buyer his Agent or
Bank
 Buyer shud receive the Docs & pay the contract price without receipt of
goods
 Buyer bears the risk during voyage but Title got when Docs transferred afer
payment
 so Buyer can sell goods during voyage
 CIF costs more than FOB
NON MARITIME TERMS:
 >EXW,FCA,CPT,CIP etc from text book

REMEDIES FOR BREACH OF CONTRACT

SELLER:
 Buyer refuse to accept goods
 Buyer to pay on certain period expired
 Goods passed to Buyer
 sue for contract price
 Goods not yet passed on to Buyer
 sue for non acceptance
 sell same goods to Third party & collect the difference from original Buyer
 Buyer insolvent
 stop goods in transit
 repossess goods & sell
 FOB contract, stop & inform Carrier & pay frt if any
 Seller has Lien over the cargo for any non payment

BUYER
 Seller’s breach of contract ie
 Late delivery
 short delivery
 Non delivery
 Damaged goods
 Defective documents
 Reject goods if not delivered on time
 claim damages in costs ie difference in contract price & market price
 Defective delivery
 sue for damaged goods based on market value

DISPUTE SETTLEMENT OF CONTRACT

 Jurisdiction applies
 arbitration clause